Hong Kong offers Indian startups unique edge in proximity to Mainland market: Stephen Phillips, Director-General InvestHK

The Director-General of Hong Kong’s investment promotion body is in the country for a five-day visit to engage with local business community and entrepreneurs. 

Stephen Phillips is the Director-General of Investment Promotion at Invest Hong Kong (InvestHK), the government department responsible for attracting and facilitating foreign direct investment into Hong Kong. Stephen is on a five-day duty visit to India aimed at engaging the local business community and entrepreneurs to keep them abreast of the latest business advantages Hong Kong has to offer.

The visit will cover four cities, namely Delhi, Surat, Mumbai and Hyderabad, where Stephen will meet business leaders from various sectors including technology, financial services and retail. In Hyderabad and Mumbai, he will also attend business events organised in collaboration with startup organisations. YourStory spoke to Stephen to find out more. 

YourStory: What brings you to India on this tour?

Stephen Phillips: India is a fast growing economy and one of InvestHK’s key priority markets. We believe that Hong Kong is the strategic location for Indian companies looking to develop a strong base in Asia and to scale their business globally. This is why we are here in the nation trying to get in touch with leaders of different business sectors, to tell them the new business opportunities Hong Kong has to offer. Our previous visits to India were in 2014 and 2016.

YS: Which are the organisations and industries you will be meeting?

SP: My current visit will cover four cities: Delhi, Surat, Mumbai as well as Hyderabad. I will meet a wide range of business leaders notably in the technology, financial services, retail, the aircraft leasing and data centre sectors. In Hyderabad, I will also attend the seminar titled How to grow your business in Hong Kong & beyond, co-organised with T-Hub. I will also be meeting high growth startups in Mumbai and Hyderabad at other networking events.

YS: What do you attribute the growth from Indian investments in Hong Kong to?

SP: Hong Kong is not only a major financial and business hub in Asia and has close proximity to the huge Mainland market; new opportunities abound in areas such as innovation and technology, creative industries, smart city, fintech as well as biotech. All these will help Indian companies and entrepreneurs from a diverse range of sectors expand in the region.

Indian companies look at Hong Kong as a springboard to enter the larger Mainland market and expand in Asia. We have also seen Indian companies now taking advantages of recent business friendly policies by Hong Kong government such as Corporate Treasury Centre and its startup initiatives, especially in fintech and IoT sector. Indian government has also announced that a Double Taxation Avoidance Agreement will be implemented with Hong Kong soon, which will further add to the momentum of increased investments from India to HK.

According to data from the Census and Statistics Department, inward direct investment from India reached $12.5 billion at the end of 2016, representing almost a 17 percent year-on-year increase. Therefore, we see much room for further growth in FDI from India to Hong Kong.

YS: What are the tax and other incentives for Indian businesses looking to expand in HK?

SP: I will also update the Indian business community on Hong Kong's latest tax incentives such as the proposed two-tier tax regime and other concessionary tax regimes such as corporate treasury centres and aircraft leasing.

The Hong Kong government announced a two-tier profits tax system to enhance Hong Kong's competitiveness in October 2017. Under the proposed regime, the tax rate for the first $2 million of profits of enterprises will be lowered to 8.25 percent, or half of the standard profits tax rate. Profits of over $2 million will continue to be subject to the standard tax rate of 16.5 percent. In addition, the first $2 million eligible R&D expenditure will also enjoy a 300 percent tax deduction with the remainder at 200 percent, in order to encourage enterprises to invest in research and development.

To encourage a greater level of corporate treasury activities, the Hong Kong government also amended the tax law to allow, under specific conditions, the deduction of interest expenses in calculating profits tax for the intra-group financing business of corporations, and reduce profit tax for specified treasury activities by 50 percent, to 8.25 percent for qualifying treasury centres. The city is an ideal location for Indian companies to establish their corporate treasury centres. The new law had retroactive effect from April 1, 2016.

The Hong Kong government also introduced a concessionary tax regime that seeks to promote the Hong Kong aircraft leasing industry. In general, qualifying aircraft lessors are entitled to a tax concession under which only 20 percent of the net lease rentals are assessed to compensate for their non-entitlement to depreciation allowance on the aircraft. The profits derived by qualifying aircraft lessors and qualifying aircraft leasing managers from qualifying activities are charged at 8.25 percent, i.e. one-half of corporate Profits Tax rate. The tax concessions are in force in July 2017.

YS: Any initiatives directed at growth to mid-sized startups?

SP: Invest Hong Kong has been running a startup focussed programme called StartmeupHK. This has been very successful and has been attended by startups and other members of the ecosystem from India. We also have participation of the larger Indian community in startup accelerators and incubators in HK.

Hong Kong’s startup ecosystem is thriving and there is an estimated 2,229 startups in Hong Kong in 2017, up about 16 percent compared to 2016. There are 46 co-working space, accelerator or incubator operators in Hong Kong, running shared spaces in 62 locations across Hong Kong. These include the government-subsidised Science Park and Cyberport. There is a variety of funding for startups to apply for depending on their development stages.

In terms of location, Hong Kong offers unique edge in proximity to Mainland market, and the high-end manufacturing centre in southern China provide quick prototyping for entrepreneurs. Hong Kong’s easy business environment and free market also mean a lot of ease for startups to set up in Hong Kong.